Markets Drop After Trump Threatens Tariffs Over Greenland

Global financial markets started the week in turmoil after Trump threatened 8 countries with tariffs in his latest effort to pressure the Danish government into selling Greenland and ahead of a global leaders meeting in Davos.

The Key Elements Driving Markets

• Global equities drop while gold and silver hit new records amid trade fears as Trump threatens new tariffs on allies in a pressure campaign over Greenland.
• The EU is reportedly considering retaliatory tariffs and implementing the ACI, which would bar US companies from accessing the common market.
• Trump is set to address Davos and meet with European leaders this week, as safe-haven assets surge amid geopolitical uncertainty.

Stocks Down, Gold Up Over Trade War Fears

Global equity indices were down on Monday while gold hit another record high, with Europe posting its worst open in almost a year. US President Donald Trump threatened 10% tariffs on eight European nations, set to take effect on the 1st of February. The tariffs would rise to 25% if the US doesn't secure Greenland by June. The eight countries targeted include the UK and Denmark, along with others that are sending multinational defence teams to assess Greenland's defence posture over the weekend. The measure threatened to reignite the trade war between the world's two largest economies. Over 20% of the US imports originate in the EU. A trade deal signed last year was facing implementation problems and still needed to be confirmed by the EU Parliament. Following Trump's latest move, the largest political bloc in the European Parliament, the centre-right European People's Party (EPP), said it would not support ratification of the trade agreement until the situation in Greenland was resolved.

European leaders will meet this week to discuss how to respond, with analysts reviewing the potential market impact of measures that could be taken. They include the so-called "trade bazooka", which involves implementing the never-before-used Anti-Coercion Instrument (ACI). In theory, the legislation would allow European governments to shut off US access to the single market. Last year, Brussels drew up a list of €93 billion in tariffs it considered a retaliatory measure against Trump's "Liberation Day" tariffs targeting a wide range of products, including soybeans, aircraft components, and bourbon. However, the EU decided to hold off on implementation until a deal is reached, but the plan remains ready to be implemented as a potential first response if European leaders decide to do so this week.

Next Steps For the Markets

The German component of the team sent to Greenland that sparked Trump's ire has already departed, and the US President is scheduled to address the World Economic Forum in Davos, Switzerland, on Wednesday. Some speculate it could be an opportunity to switch gears on tension, pointing to the "TACO" trades of last year. In the meantime, safe haven assets have been given a new wind, with the precious metals complex rising as gold and silver hit new record highs, and the dollar weakened.

Silver Eyes Triple Digits?

Silver has been trading on the upper side of VWAP since November last year, keeping the uptrend intact with major support at $81.67. Judging by its latest correction from $84 to $70, the measured move projection suggests a target of $98, shy of the $100 mark. Consequently, this is at the same level as the current VWAP resistance. But despite its impressive rally, the VWAP has also begun to expand, while the RSI remains in divergence, pointing to increased volatility and a potential pullback.

Source: SpreadEx | Spot Silver, Daily Chart